Mumbai: The rupee bounced back on Wednesday, tracking local shares which recovered on foreign fund inflows, while gains in the euro also aided.
At 11:58 am, the partially convertible rupee was at 49.2100/2150 per dollar, from Tuesday’s close of 49.27/28, after trading in a 49.2125-49.4200 range so far in the day.
“There are custodial flows (foreign fund inflows) in the market and the equities are positive, which have caused the rupee to reverse,” a trader with a state-run bank said.
Traders expect the Indian unit to move in a 49.20-49.55 band during the day.
Indian shares gained 0.5% in a choppy trade on Wednesday on value buying after last two sessions’ fall, but the gains were capped by worries over the euro zone debt crisis after Greece’s call for a referendum.
The euro nudged up on Wednesday, moving away from a three-week trough marked the day before, as investors covered short positions following its worst two-day fall since May with jitters over Greece’s referendum set to cap any bigger gains.
The euro was at $1.3744, compared with $1.3702 at the end of local trade on Tuesday, while the index of the dollar against six major currencies was at 77.083 points versus 77.273 points.
Dealers said dollar demand from oil importers will keep the rupee from gaining sharply. Oil is India’s largest import item and oil refiners are the largest buyers of dollars in the domestic market.
Brent crude fell for a fourth day on Wednesday, the longest losing streak since September, on worries that renewed euro zone debt woes and weak economic data from China and the United States could hurt the global recovery and oil demand.
The market will also watch the outcome of the US Federal Reserve meeting due at around 10:00 pm. The Fed will issue fresh economic forecasts at 10:30 pm, and its chairman Ben Bernanke’s news conference will follow 15 minutes later.
The Fed, which could begin to prepare financial markets for further monetary easing at the conclusion of the two-day meet, even if it refrains from new stimulus just yet.
“Rates being low is a constant. The market will wait to see if they announce any concrete steps that will give a boost to the market,” a trader with a foreign bank said.
The one-month onshore forward premium on the rupee was at 27 points from 28 on Tuesday, the three-month premium was at 67.75 points from 66.50 and the one-year premium was at 162.25 points from 161.25 points.
The one-month offshore non-deliverable forward contracts were quoted at 49.64, weaker versus the spot rupee rate.
In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and the MCX-SX were at 49.5175, while those on the United Stock Exchange were at 49.5200. The total traded volume on the three exchanges was $1.06 billion.